Same for me on 2010 iMac. For Me i clicked update all and it was about 4gb because I had not updated in a while and it made it to about 1 gb and then that came up.
Had this same error once last night... I put it down to servers being busy with mountain lion downloads. It said at one point that the iPhoto update woul take 7 hours. Left it alone and made a coffee - next time I looked it was finished. Just a few minutes later.